FX Market Turnover Rises to $1.76bn Amid Sharp Decline in Derivatives Activity
The Nigerian foreign exchange (FX) market recorded a slight uptick in trading activity last week, with total turnover across the FX Spot and Derivatives markets reaching $1.76 billion. This marks a 0.38% increase compared to the previous week’s $1.75 billion, according to data from FMDQ Exchange. The rise was primarily attributed to a marginal gain in the Spot FX segment, which continues to dominate FX transactions in Nigeria. Spot FX turnover grew by 0.45%, equating to an increase of $7.79 million.
In contrast to the gains in the Spot FX segment, the Derivatives market experienced a sharp decline, dropping by 80.67% to just $0.29 million. This downturn was primarily due to a decrease in FX Forwards turnover, which contributed significantly to the overall reduction in derivative activity. Additionally, the Exchange-Traded FX Futures and the Cleared Naira-Settled Non-Deliverable Forwards (NSNDF) segments remained inactive, continuing a months-long trend of stagnation in these areas.
Analysts interpret the data as a reflection of ongoing market caution, driven by uncertainties surrounding Nigeria’s FX policy environment and the volatile valuation of the Naira. While the modest uptick in spot transactions may indicate a slight improvement in liquidity or demand, the steep drop in derivative activity signals a lack of enthusiasm for hedging and long-term currency exposure. Analysts point to the dormancy in futures and NSNDF as evidence of weak confidence in the predictability of future FX rates.
The Central Bank of Nigeria (CBN) has introduced a range of measures to liberalize and stabilize the FX market. These include efforts to harmonize exchange rates between the official and parallel markets and the reduction of administrative obstacles to currency trading. However, despite these reforms, businesses and investors remain concerned about ongoing exchange rate volatility, which undermines certainty and planning in the FX market.
Looking ahead, market participants are closely watching key macroeconomic indicators such as inflation, external reserves, and oil export levels—all of which influence FX stability. As Nigeria moves further into the second quarter of 2025, attention is focused on the CBN’s next policy steps to strengthen confidence and promote a more transparent and liquid FX environment. The effectiveness of these measures will be critical in restoring market momentum and investor trust in the months ahead.
Source: The sun